Take the Zacks Approach to Beat the Markets: Perimeter Solutions, Climb Global, McDonald's in Focus

Santanu Roy

Mon, Oct 7, 2024, 7:06 AM8 min read

In this article:

Last week, two of the three major U.S. indexes ended in red due to a profit-booking spree by investors. The Nasdaq Composite and the S&P 500 have declined 0.28% and 0.19%, respectively, whereas the Dow Jones Industrial Average has gained marginally by 0.05%.

The domestic macroeconomic scenario in the United States is favorable for investors and the Federal Reserve to act according to its plan of gradually bringing the key interest rates back to the 2.75-3% range by 2026. In August, the Personal Consumption Expenditures Price Index, a gauge that the Fed focuses on, rose 0.1% for the month but fell 2.2% year over year, reaching its lowest since February 2021, hovering near the Fed’s 2% target. The labor market is also resilient and there are no signs of deterioration as job openings rebound. The job openings unexpectedly increased from 329,000 to 8.040 million in August, and the Job Openings and Labor Turnover Survey (JOLTS) also showed layoffs declining, as there were 1.13 job openings for every unemployed person in the same period. The services sector activity has also witnessed expansion as the Institute of Supply Management reported that Services PMI in September was 54.9% compared to 51.5% in August. It is important to note that any reading above 50% indicates expansion in services activities.

On the international front, rising geopolitical tensions in the Middle East, after Iran carried out a missile strike against Israel disrupted the gobal supply chain, thereby impacting energy prices.

Regardless of market conditions, we, here at Zacks, provide investors with unbiased guidance on how to beat the market.

As usual, Zacks Research guided investors over the past three months with its time-tested methodologies. Given the prevailing market uncertainty, you may want to look at our feats to prepare better for your next action.

Here are some of our key achievements:

Perimeter Solutions and Arch Capital Following Zacks Rank Upgrade

Shares of Perimeter Solutions PRM have gained 38.9% (versus the S&P 500’s 10.7% increase) since it was upgraded to a Zacks Rank #1 (Strong Buy) on August 6.

Another stock, Arch Capital Group ACGL, which was upgraded to a Zacks Rank #2 (Buy) on August 6, has returned 19.6% (versus the S&P 500’s 10.7% increase) since then.

Zacks Rank, our short-term rating system, has earnings estimate revisions at its core. Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

A hypothetical portfolio of Zacks Rank #1 stocks has returned +6.1% in the year-to-date period through April 1, 2024, vs. +11.3% for the S&P 500 index and +7.7% for the equal-weight version of the S&P 500 index.

This hypothetical portfolio returned +20.63% in 2023 vs. +24.83% for the S&P 500 index and +15% for the equal-weight S&P 500 index.

The portfolio of Zacks Rank #1 stocks is an equal-weight portfolio, while the S&P 500 index is a market-cap-weighted index that has been notably distorted by the concentrated performance of mega-cap stocks since October 2022.

The Zacks Model Portfolio — consisting of Zacks Rank #1 stocks — has outperformed the S&P index by more than 16 percentage points since 1988 (through April 1, 2024, the Zacks # 1 Rank stocks generated an annualized return of +27.6% since 1988 vs. +11.1% for the S&P 500 index).You can see the complete list of today’s Zacks Rank #1 stocks here >>>

Check Perimeter Solutions’s historical EPS and Sales here>>>

Check Arch Capital’s historical EPS and Sales here>>>

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Zacks Recommendation Upgrades Climb Global Solutions and Clear Secure

Shares of Climb Global Solutions, Inc. CLMB and Clear Secure, Inc. YOU have advanced 23.3% (versus the S&P 500’s 7.4% increase) and 19.5% (versus the S&P 500’s 7.4% rise), since their Zacks Recommendation was upgraded to Outperform on August 12 and August 13, respectively.

While the Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon, the Zacks Recommendation aims to predict performance over the next 6 to 12 months. However, just like the Zacks Rank, the foundation for the Zacks Recommendation is trends in earnings estimate revisions.

The Zacks Recommendation classifies stocks into three groups — Outperform, Neutral and Underperform. While these recommendations are determined quantitatively, our analysts have the flexibility to override them for the 1100+ stocks they closely follow based on their better judgment of factors such as valuation, industry conditions and management effectiveness than the quantitative model.

To access our research reports with Zacks Recommendations for the 1100+ stocks we cover, click here>>>

Zacks Focus List Stocks Axon Enterprise, Sea Shoot Up

Shares of Axon Enterprise, Inc. AXON, which belongs to the Zacks Focus List, have gained 44.1% over the past 12 weeks. The stock was added to the Focus List on June 3, 2020. Another Focus-List holding, Sea Limited SE, which was added to the portfolio on March 26, 2020, has returned 30.2% over the past 12 weeks. The S&P 500 has advanced 3.1% over this period.

The Focus List portfolio returned +10.23% in 2024 Q1 vs. +10.56% for the S&P 500 index and +7.9% for the equal-weight S&P 500 index.

The 50-stock Zacks Focus List model portfolio returned +31.44% in 2023 vs. +26.28% for the S&P 500 index and +13.61% for the equal-weight S&P 500 index. In 2022, the portfolio produced -15.2% vs. the S&P 500 index’s -17.96%.

Since 2004, the Focus List portfolio has produced an annualized return of +11.91% (through March 31, 2024). This compares to a +10.25% annualized return for the S&P 500 index in the same time period.

Unlock all of our powerful research, tools and analysis, including the Focus List, Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more, as part of Zacks Premium. Gain full access now >>

Zacks ECAP Stocks Fiserv & Automatic Data Processing Make Significant Gains

Fiserv, Inc. FI, a component of our Earnings Certain Admiral Portfolio (ECAP), has jumped 21% over the past 12 weeks. Automatic Data Processing, Inc. ADP has followed Fiserv with 19.8% returns.

ECAP, which consists of 30 concentrated, ultra-defensive, long-term Buy and Hold stocks, has returned +9.08% in the year-to-date period (through March 31, 2024) vs. +10.42%.

In 2023, the portfolio returned +12.17% vs. +26.28% for the S&P 500 index. The portfolio returned -4.7% in 2022 vs. the S&P 500 index’s -17.96%.

With little to no turnover and annual rebalance periodicity, ECAP seeks to minimize capital loss by holding shares of companies whose earnings streams exhibit a proven 20+ year track record of surviving recessionary periods with minimal impact on aggregate earnings growth relative to the overall S&P 500.

The ECAP and many other model portfolios are available as part of Zacks Advisor Tools, a cloud-based solution to access Zacks award-winning stock, mutual fund and ETF research. Click here to schedule a demo.

Zacks ECDP Stocks McDonald's and The Clorox Outperform Peers

McDonald's Corporation MCD, which is part of our Earnings Certain Dividend Portfolio (ECDP), has returned 19.6% over the past 12 weeks. Another ECDP stock, The Clorox Company CLX, has also climbed 18.5% over the same time frame. Of course, the inclination of investors toward quality dividend stocks to secure an income stream amid heightened market volatility contributed to this performance.

Check McDonald's dividend history here>>>

Check The Clorox’s dividend history here>>>

With an extremely low beta and a history of minimum earnings variability over the last 20+ years, this 25-stock portfolio helps significantly mitigate risk.

ECDP has returned +4.47% in the year-to-date period (through March 31, 2024) vs. +10.42% for the S&P 500 index (IVV) and +6.9% for the Dividend Aristocrats ETF (NOBL).

The portfolio returned -0.9% in 2023 vs. +26.28% for the S&P 500 index and +8.11% for NOBL. The portfolio returned -2.3% in 2022 vs. -17.96% for the S&P 500 index and -8.34% for NOBL.

Click here to access this portfolio on Zacks Advisor Tools.

Zacks Top 10 Stocks CyberArk Software Delivers Solid Returns

CyberArk Software Ltd. CYBR, from the Zacks Top 10 Stocks for 2024, has jumped 28% year to date, which compares to the S&P 500 index’s +20.5% increase.

The Top 10 portfolio returned +19.56% in 2024 Q1 vs. +10.56% for the S&P 500 index and +7.9% for the equal-weight version of the index.

The Top 10 portfolio returned +25.15% in 2023 vs. +26.28% for the S&P 500 index. Since 2012, the Top 10 portfolio has produced a cumulative return of +1,060.9% through the end of 2023 vs. +360.1% for the S&P 500 index.

Since 2012, the Zacks Top 10 portfolio has produced an annualized return of +25.02% through the end of 2024 Q1 vs. +14.1% for the S&P 500 index and +12.7% for the equal-weight version of the index. The portfolio has produced a cumulative return of +1,442.3% vs. +403.03% for the S&P 500 index and +331.29% for the equal-weight index.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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Take the Zacks Approach to Beat the Markets: Perimeter Solutions, Climb Global, McDonald's in Focus